11 Jun 2018 11:33
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED31ST MARCH 2018
CHAIRMAN'S STATEMENT
Performance
In the year ended 31st March 2018, the returns to shareholders with net dividends reinvested in the Company's Growth (JETG) and Income (JETI) Portfolios were 6.6% and 8.4% respectively. Over the same period, the percentage increase in the Company's Growth and Income net asset value (NAV) were 7.3% and 6.4% respectively. Returns on both measures for the two portfolios were well in excess of the benchmark of 3.0%. The Company's performance over longer periods of five and ten years were also comfortably ahead of benchmark (the MSCI Europe ex UK Index in sterling).
The discount on the Growth share price to NAV widened during the reporting period, whereas the discount on the Income share price to NAV narrowed over the same period, reflecting the demand for income.
In their report on pages 8 and 10 of the Company's Annual Report and Financial Statements, the Investment Managers comment on some of the factors underlying the performance of the two portfolios including performance against the benchmark over the Company's financial year, as well as commenting on the economic and market background.
Revenue and Dividends
On the Growth shares the Board's aim is that annual dividend payments continue to be broadly in line with revenues received on the underlying portfolio.
In the period the dividend paid per Growth Share was 6.85 pence (2017: 6.85 pence). On the year-end share price of 297.0p (2017: 285.0p), this represents a yield of 2.9% (2017: 2.4%). Revenue per share on the Growth portfolio for the year to 31st March 2018 (calculated by reference to the average number of shares in issue over the period) amounted to 8.56 pence per share (2017: 6.75 pence per share).
As regards the Income shares, the Board's aim is to provide a regular stream of dividend income on a quarterly basis, subject to the availability of distributable reserves. The Board have agreed that the amount of JETI's four dividend payments should be more evenly spread over the Company's current financial year. This will also more closely match dividend payments with dividend receipts, as most of the Company's dividend income is received in the first half of the Company's financial year. Therefore, for the Company's year ended 31st March 2019, JETI's first three interim dividends may be larger than the previous years, however, the fourth interim may be lower, as more dividends will have been paid to shareholders in the first three quarters of the Company's financial year.
In the period the dividend paid per Income Share was 5.80 pence (2017: 5.00 pence). On the year-end share price of 157.5p (2017: 150.5p) this represents a yield of 4.2% (2017: 3.9%). Revenue per share on the Income portfolio for the year (again, calculated by reference to the average number of shares in issue over the period) amounted to 6.65 pence per share (2017: 5.94 pence per share).
The timing of the dividend payments for both share classes are expected to be maintained with Growth shares dividends paid bi-annually in April and October and Income shares paid quarterly in April, July, October and January.
Gearing
There has been no change in the Investment Manager's permitted gearing range, as previously set by the Board, of 10% net cash to 20% geared. At 31st March 2018 the Growth portfolio was 6.0% geared and the Income portfolio was 5.6% geared.
Conversions
The Company's annual share conversion on the 15th March 2018 resulted in a relatively large shift out of Growth shares and into Income shares, with a net increase in Income shares of 8,110,720.
Share Issuance and Repurchase
At the forthcoming Annual General Meeting on the 16th July 2018 as referred to below, the Company will seek to renew its permission to allot new equity in order to manage the balance between the supply of and demand for its shares, subject to the requirements and conditions as detailed in the Notice to the Annual General Meeting on page 93 of the Company's Annual Report and Financial Statements . Such allotments benefit all shareholders not least by increasing the liquidity of the Company's shares.
The Board has a proactive approach to the use of its share repurchase powers. It remains of the view that it is important to seek to address imbalances in the supply of and demand for the Company's shares and to minimise thereby the volatility and absolute level of the discount to net asset value at which the Company's shares trade. The Board do not wish to see the discounts widen beyond 10% (on an ex-income basis) on an ongoing basis. The precise level and timing of repurchases pursuant to this policy depend upon prevailing market conditions. Over the year under review the discount levels have averaged 8.6% for the Growth shares and 7.8% for Income shares (at fair value). During the year, the Board was active in implementing its buyback policy and purchased a total of 30,116 Growth shares and no Income shares. Since the year end 146,980 Growth shares and 100,000 Income shares have been repurchased. On the 7th June 2018 the discount on the Growth and Income shares was 10.4% and 10.6% respectively (at fair value).
Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs)
You may be aware that the Regulator has recently introduced new rules (Packaged Retail and Insurance-based Investment Products Regulation (the 'PRIIPs Regulation')) that require the Investment Manager, who is deemed to be the manufacturer of the investment product, in our case this investment trust, to prepare a Key Information Document (KID) in respect of the Company. The Company is not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by the law. The figures in the KID may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed.
Board of Directors
Throughout the period the Board consisted of five Directors with currently no plans to change the composition of the Board.
During the year, the Board carried out its customary evaluation of the Directors, the Chairman, the Committees and the working of the Board as a whole. It was concluded that all aspects of the Board and its procedures were operating effectively.
In accordance with corporate governance best practice, all of the Directors retire by rotation at this year's Annual General Meeting (AGM) and will offer themselves for re-election.
In order to maintain the level of fees in line with the investment trust industry as a whole, the Company's Directors' fees were increased effective from 1st April 2018. The previous increase was on 1st April 2016. Further detail is provided on page 46 of the Company's Annual Report and Financial Statements.
As announced on 23rd February 2018, Josephine Dixon temporarily stepped down as Chair of the Audit Committee owing to health reasons. Josephine has remained on the Board of the Company. Jutta af Rosenborg is currently interim Chair of the Audit Committee whilst Josephine recuperates. Since that announcement Josephine has made positive progress and we look forward to her continued recovery and return as Chair of the Audit Committee in due course.
Transfer of Reserves between the Growth and Income Portfolios
As referred to in my Chairman's Statement included in the Company's Half Year Report and Financial Statements to 30th September 2017, following shareholders' approval of the resolutions at the Company's AGM and Growth portfolio (JETG) and Income portfolio (JETI) Class Meetings on 17th July 2017, the Board now has the power to approve transfers of retained revenue reserves from JETG to JETI in exchange for the equivalent amount of capital reserves from JETI to JETG. Following the AGM during this reporting period, the Board exercised this power and £1.376 million, being the amount of JETG's retained revenue reserve, after payment of the JETG 2.00 pence dividend paid on 7th April 2017, was transferred to JETI in exchange for the equivalent amount of capital reserves from JETI to JETG. This transfer is reflected in these Report and Financial Statements. Further explanation regarding the background to these transfers can be found in my Chairman's Statement in the Company's Annual Report and Financial Statements to 31st March 2017. During future financial years, the Company is expected to make further transfers of reserves between Growth and Income portfolios. The next transfer is expected to be made in the year ended 31st March 2019 which will be reflected in the Company's Half Year Report and Financial Statements to 30th September 2018.
Annual General Meeting
The Company's eighty ninth AGM will take place at J.P.Morgan's offices at 60 Victoria Embankment, London EC4Y 0JP on Monday, 16th July 2018 at 2.30 p.m. In addition to the formal proceedings there will, as usual, be a presentation by the Investment Managers, followed by tea when shareholders, who are always most welcome, can meet the Directors and the Investment Managers for more informal discussions.
It would be helpful if shareholders seeking answers to detailed questions put them in writing beforehand, addressed to the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP. Alternatively, questions may be submitted via the Company's website (www.jpmeuropean.co.uk).
Outlook
The Investment Managers will continue to execute the existing and practised strategy to fulfil and deliver your Company's investment objectives. Whilst the Board and Managers are aware of the many uncertainties facing stock markets, we believe that satisfactory returns are achievable given the proven stock selection skills demonstrated consistently over the medium and longer term.
For and on behalf of the Board
Andrew Adcock
Chairman 8th June 2018
INVESTMENT MANAGERS' REPORT
The year under review saw a modest advance in Sterling terms for the benchmark against which we measure our performance. In local currency terms the advance was even smaller, but Sterling's continued weakness against the Euro and Swiss franc (the two main foreign currency components of our universe) meant that the return to Sterling investors was boosted. Both classes of your investment trust outperformed at a NAV level, as the Chairman has discussed in his report, and the attribution shown in the accompanying panel shows that in both classes the most important contribution to performance came from stock selection.
The small advance in the European market over the year in fact belied a great deal of encouraging news, and two months before the period end, in January, the market was appreciably (about 8%) higher, before succumbing to a bout of profit-taking. We remain confident about the future for European markets and will discuss that in more detail later in our report.
Key events during the year in the economic sphere saw the European economy accelerate, helped by continued easy monetary policy, a steady fall in unemployment, a recovery in construction and in capital investment, and by a healthy picture elsewhere as Emerging Markets recovered from the commodities downturn. In the corporate sphere European companies grew earnings and profitability, while there was a steady flow of mergers and acquisitions to underpin asset values. In the political sphere, populism was the dog that did not bark as extremist parties failed to break through in the Netherlands and France.
Taking each of these in turn, the recovery that had started in the second quarter of 2013 gathered pace, with exports showing particular strength as global demand improved. Although the Euro strengthened over the year, the move on a trade-weighted basis was of the order of 5% - not significant enough to dampen net export volumes. Although we talk about the Euro strengthening, the currency story was in fact one of sustained US Dollar weakness against all major currencies, and this drove a lot of the investment themes in play around the world. A weakening US Dollar tends to be associated with higher commodities prices, higher inflation, steepening yield curves, and cyclicals and financials outperforming defensives. It also tends to be associated with strength in Emerging Markets, which again reinforces cyclical themes within equities. So much for exports, but on the domestic side there was continued good news in Europe, with unemployment falling from 9.5% to 8.5%. This in fact understated the strength of the European jobs market, because the participation rate (the number of people active in the workforce) also rose, so the numbers in employment rose by 1.6%, which is the fastest rate of jobs growth since before the financial crisis. This boosted consumer confidence and consumption, while on the industrial side of the economy, along with the good news on exports, we saw industrial production rising by around 5%, construction continuing to recover, and government expenditure rising modestly.
This encouraging economic background, both in Europe and elsewhere fed through into corporate profits, which grew over 2017 by about 10%. Some of this was a product of earnings recovery in sectors like Energy and Banks, but there was a broad-based improvement in profitability which was a welcome relief after six years of earnings disappointment. Our investment style focuses on finding areas of the market where improving earnings trends are either not fully discounted in the valuation (in the Income share class we use yield as our valuation filter), or are supporting strong momentum in share price performance, and over the year we were able to find a number of opportunities.
We said earlier that populism was the dog that did not bark, and in key elections in the Netherlands and France this was true, with the Dutch Freedom Party fading in the polls and the Front National in France unable to capitalise on its front-runner status in the first round. The French Presidential and Parliamentary elections proved a stunning success for Emmanuel Macron, who chose to bypass the traditional parties of left and right and found his own political entity, En Marche, winning not only the Presidency, but also a workable majority in Parliament. His programme for France envisions a series of business-friendly measures and also further reforms to labour markets. Time will tell if he succeeds, but the fact of his election victory suggests popular support for his manifesto. The test will come when he has to face down the powerful French unions. In Italy the election towards the end of the year returned no overall majority for any one party, but the 5 Star Movement and Northern League both came out ahead of the Democratic Party and Forza Italia, and there is now talk of their forming a coalition government. Were they to stick to their populist rhetoric of the last five years that would be a concern, but in fact since doing well in the election both parties have toned down their message, and we are about to see whether there will be a repetition of a pattern observed elsewhere - that there is a very big difference between criticising from the sidelines and actually taking responsibility for the political and economic destiny of a major country.
GROWTH PERFORMANCE ATTRIBUTION
FOR THE YEAR ENDED 31ST MARCH 2018
| % | % |
Contributions to total returns |
|
|
Benchmark return |
| 3.0 |
Asset allocation | 0.6 |
|
Stock selection | 4.3 |
|
Gearing/cash | 0.3 |
|
Currency | 0.1 |
|
Investment manager contribution |
| 5.3 |
Portfolio return |
| 8.3 |
Management fee/other expenses | -1.0 |
|
Share buyback | 0.0 |
|
Other effects |
| -1.0 |
Return on net assets |
| 7.3 |
Return to shareholders |
| 6.6 |
Source: B-One/JPMAM/AIC/Morningstar.
All figures are on a total return basis. Performance attribution analyses how the Growth portfolio achieved its recorded performance relative to its benchmark.
A glossary of terms and alternative performance measures is provided on page 96 of the Company's Annual Report and Financial Statements.
Stock Contributors
In the Growth portfolio one area of the market which did tremendously well was Technology. In Europe this is rather different to the US and China, because Europe tends to be strong on suppliers rather than Media or Retail, but we certainly benefited from our exposure to the semiconductor sector which performed exceptionally well as the market continued to focus on the potential for growth from smart phones, electric vehicles and the internet of things. For example, holdings in BE Semiconductor and Siltronic more than doubled during the year, but this was a function of extremely rapid growth in earnings at the two companies. Siltronic, which makes the raw hyper-pure silicon wafers onto which semi-conductors are etched, saw 2017 earnings per share grow from €0.40 to €6.2, with further growth to €11.0 expected in 2018. BE Semiconductor, which specializes in the complex packaging requirements for extremely fragile finished semi-conductors, saw 2017 earnings per share grow from €0.85 to €2.1, with further growth expected in 2018. Elsewhere within the cyclical end of the market our positions in paper stocks helped the portfolio as UPM-Kymmene and Stora Enso enjoyed significant upward earnings revisions as paper prices increased during the year - paper prices respond to the balance between supply and demand and in the case of the paper industry they have been disciplined about restricting new supply while demand has expanded with nominal GDP growth.
Turning to the Income portfolio the same themes also applied. We owned BE Semiconductor as well but the exposure to paper was through Ence Energia y Celulosa, and Papeles y Cartones de Europa, both of which doubled. Given the requirement for yield in the Income portfolio an above market weighting to the utilities sector has been the case for some time so it was pleasing to see strong performance in particular from three Italian companies - ASTM and Societa Iniziative Autstradali e Servizi in the motorway subsector and ERG in renewables. All three enjoyed strong earnings momentum and share prices up more than 60% in the year under review.
INCOME PERFORMANCE ATTRIBUTION
FOR THE YEAR ENDED 31ST MARCH 2018
| % | % |
Contributions to total returns |
|
|
Benchmark return |
| 3.0 |
Asset allocation | 1.4 |
|
Stock selection | 3.1 |
|
Gearing/cash | 0.0 |
|
Currency | -0.1 |
|
Investment manager contribution |
| 4.4 |
Portfolio return |
| 7.4 |
Management fee/other expenses | -1.0 |
|
Other effects |
| -1.0 |
Return on net assets |
| 6.4 |
Return to shareholders |
| 8.4 |
Source: B-One/JPMAM/AIC/Morningstar.
All figures are on a total return basis. Performance attribution analyses how the Income portfolio achieved its recorded performance relative to its benchmark.
A glossary of terms and alternative performance measures is provided on page 96 of the Company's Annual Report and Financial Statements.
Outlook
As we look into 2018 and further we believe that the picture remains encouraging for European equities. There is another year of growth in earnings in prospect, and to our mind valuation is still attractive, especially relative to bonds and cash, where yields remain extremely low. Furthermore, despite the growth in earnings last year, the valuation of the market actually fell slightly, so there is room for valuations to rise as the cycle matures, and we expect that our disciplined approach to investing in both the Growth and the Income share classes will continue to repay the faith of our investors.
Stephen Macklow-Smith
Alexander Fitzalan Howard
Michael Barakos
Thomas Buckingham
Investment Managers 8th June 2018
PRINCIPAL RISKS
Principal Risks
The Directors have carried out a robust assessment of the principal risks facing the Company. With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company These key risks fall broadly under the following categories:
Investment
The Board recognises that performance of the trust's investment portfolio is fundamental to the success of the Company. In order to achieve the objectives given the risks inherent in investment such as market, gearing, currency and interest rates, investment guidelines, policies and processes are in place which aim to mitigate these risks. They are designed to ensure that the portfolios are managed in a way which is aimed at identifying the best stocks and diversifying risk. Regular reports are received by the Board from the Manager on stock selection, asset allocation, gearing, hedging and costs of running the Company and these are reviewed at each Board meeting in detail. Compliance with investment guidelines and policies are reviewed by the Manager and the Board. And discussed at each board meeting in detail together with an analysis of market parameters affecting the business.
Investment includes market risk and this arises from uncertainty about the future prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set Investment Restrictions and Guidelines which are monitored and reported on by JPMF. The Board monitors the implementation and results of the investment process with the Manager.
Further details regarding financial instruments are disclosed in note 22 on pages 77 to 83 of the Company's Annual Report and Financial Statements.
Operational
In common with most investment trusts the Board delegates the operation of the business to third parties, the principal delegate being the Manager JPFM. Disruption to, failure of, or fraud in JPMF's accounting, dealing or payments systems or the Depositary or Custodian's records could prevent timely implementation of investment decisions, and potentially shortfalls in the accuracy of reporting and monitoring of the Company's financial position and loss. Details of how the Board monitors the services provided by JPMF and its associates and the Depositary and Custodian and the key elements designed to provide effective internal control are included within the Internal Control section of the Corporate Governance report on page 42 of the Company's Annual Report and Financial Statements.
Regulatory
The Company operates in an environment with significant regulation including the UKLA Listing Rules, The UK Companies Act, the Corporation Taxes Act, Market Abuse Regulation, Disclosure Guidance and Transparency Regulations and the Alternative Investment Fund Managers Directive (AIFMD).
There has been no significant change to this risk during the year though the environment as a whole is considered to be one of increasing costs for compliance.
Discount premium to NAV
Share price discount or premium to net asset value per share could lead to high levels of uncertainty and reduced shareholder confidence. For further details of the Company's action in addressing this risk and its buyback activity and discount, please see the Share Repurchase section of the Chairman's Statement on page 5 of the Company's Annual Report and Financial Statements.
Strategy
The Board reviews the overall strategy and structure of the Company in comparison to performance against benchmark, peer group and share activity. The Board holds a separate meeting devoted to strategy each year which includes consideration of whether the Company's objectives and structures are appropriate for the long term interests of shareholders. Please see the Outlook section of the Chairman's Statement on page 5 of the Company's Annual Report and Financial Statements for further details.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report on page 38 of the Company's Annual Report and Financial Statements. The management fee payable to the Manager for the year was £3,573,000 (2017: £2,994,000), of which £nil (2017: £nil) was outstanding at the year end.
During the year £nil (2017: £156,000) was payable to the Manager for the administration of savings scheme products, of which £nil (2017: £16,000) was outstanding at the year end. There was a change in the allocation methodology with the 2016 and 2017 savings scheme fees before recalculation with the new methodology and the cost savings offset against the 2018 fee.
Included in administration expenses in note 6 on page 67 of the Company's Annual Report and Financial Statements are safe custody fees amounting to £50,000 (2017: £47,000) payable to JPMorgan Chase of which £6,000 (2017: £9,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. Commission amounting to £4,000 (2017: £35,000) was payable to JPMorgan Securities Limited for the year of which £nil (2017:£nil) was outstanding at the year end.
The Company holds investments in funds managed by JPMAM. At 31st March 2018 these were valued at £15.6 million (2017: £14.2 million) and represented 3.5% (2017: 3.3%) of the Company's investment portfolio. During the year the Company made £nil purchases of such investments (2017: £nil) and sales with a total value of £1.2 million (2017: £3.3million). Income amounting to £213,000 (2017: £168,000) was receivable from these investments during the year of which £nil (2017: £nil) was outstanding at the year end.
The Company also holds cash in the JPMorgan Euro Liquidity Fund, managed by JPMF. At the year end this was valued at £23.9 million (2017: £20.0 million). Interest amounting to £85,000 (2017: £66,000) was payable during the year of which £nil (2017: £nil) was outstanding at the year end.
Stock lending income amounting to £53,000 (2017: £101,000) was receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to £9,000 (2017: £18,000).
Handling charges on dealing transactions amounting to £53,000 (2017: £73,000) were payable to JPMorgan Chase Bank N.A. during the year of which £8,000 (2017: £12,000) was outstanding at the year end.
At the year end, total cash of £5.9 million (2017: £6.0 million) was held with JPMorgan Chase Bank N.A.. A net amount of interest of £nil (2017: £2,000) was receivable by the Company during the year from JPMorgan Chase of which £nil (2017: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on page 37 and in note 6 on page 67 of the Company's Annual Report and Financial Statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the annual report and accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and applicable law. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business;
and the Directors confirm that they have done so.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The accounts are published on the www.jpmeuropean.co.uk website, which is maintained by the Company's Manager, JPMorgan Funds Limited. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for preparing a Strategic Report, a Directors' Report and a Directors' Remuneration Report that comply with that law. The Strategic Report and the Directors' report include a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
Each of the Directors, whose names and functions are listed on page 37 of the Company's Annual Report and Financial Statements confirm that, to the best of their knowledge the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and return or loss of the Company.
The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.
For and on behalf of the Board
Andrew Adcock
Chairman
8th June 2018
GROWTH SHARES
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE YEAR ENDED 31ST MARCH 2018
| 2018 | 2017 | ||||
| Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Gains on investments and |
|
|
|
|
|
|
derivatives held at fair value through |
|
|
|
|
|
|
profit or loss | - | 13,771 | 13,771 | - | 49,029 | 49,029 |
Net foreign currency (losses)/gains | - | (150) | (150) | - | 224 | 224 |
Income from investments | 8,049 | - | 8,049 | 7,626 | - | 7,626 |
Interest receivable and similar income | 19 | - | 19 | 52 | - | 52 |
Gross return | 8,068 | 13,621 | 21,689 | 7,678 | 49,253 | 56,931 |
Management fee | (642) | (1,499) | (2,141) | (538) | (1,255) | (1,793) |
Other administrative expenses | (436) | - | (436) | (506) | - | (506) |
Net return on ordinary activities |
|
|
|
|
|
|
before finance costs and taxation | 6,990 | 12,122 | 19,112 | 6,634 | 47,998 | 54,632 |
Finance costs | (241) | (563) | (804) | (255) | (595) | (850) |
Net return on ordinary activities |
|
|
|
|
|
|
before taxation | 6,749 | 11,559 | 18,308 | 6,379 | 47,403 | 53,782 |
Taxation | (160) | - | (160) | (1,137) | - | (1,137) |
Net return on ordinary activities |
|
|
|
|
|
|
after taxation | 6,589 | 11,559 | 18,148 | 5,242 | 47,403 | 52,645 |
Return per Growth share | 8.56p | 15.01p | 23.57p | 6.75p | 61.08p | 67.83p |
All revenue and capital items in the above statement derive from continuing operations.
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
AT 31ST MARCH 2018
| 2018 | 2017 |
| £'000 | £'000 |
Fixed assets |
|
|
Investments held at fair value through profit or loss | 261,864 | 263,321 |
Current assets |
|
|
Derivative financial assets | 111 | 56 |
Debtors | 760 | 764 |
Cash and cash equivalents | 17,586 | 18,765 |
| 18,457 | 19,585 |
Current liabilities |
|
|
Creditors: amounts falling due within one year | (7,816) | (8,279) |
Derivative financial liabilities | (93) | (12) |
Net current assets | 10,548 | 11,294 |
Total assets less current liabilities | 272,412 | 274,615 |
Creditors: amounts falling due after more than one year | (25,418) | (26,014) |
Net assets | 246,994 | 248,601 |
Net asset value per Growth share | 338.5p | 321.9p |
INCOME SHARES
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE YEAR ENDED 31ST MARCH 2018
| 2018 | 2017 | ||||
| Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Gains on investments and derivatives held at fair |
|
|
|
|
|
|
value through profit or loss | - | 6,017 | 6,017 | - | 30,765 | 30,765 |
Net foreign currency losses | - | (1,003) | (1,003) | - | (275) | (275) |
Income from investments | 7,501 | - | 7,501 | 7,207 | - | 7,207 |
Interest receivable and similar income | 34 | - | 34 | 51 | - | 51 |
Gross return | 7,535 | 5,014 | 12,549 | 7,258 | 30,490 | 37,748 |
Management fee | (573) | (859) | (1,432) | (480) | (721) | (1,201) |
Other administrative expenses | (263) | - | (263) | (308) | - | (308) |
Net return on ordinary activities before |
|
|
|
|
|
|
finance costs and taxation | 6,699 | 4,155 | 10,854 | 6,470 | 29,769 | 36,239 |
Finance costs | (209) | (311) | (520) | (201) | (301) | (502) |
Net return on ordinary activities before taxation | 6,490 | 3,844 | 10,334 | 6,269 | 29,468 | 35,737 |
Taxation | (231) | - | (231) | (696) | - | (696) |
Net return on ordinary activities after taxation | 6,259 | 3,844 | 10,103 | 5,573 | 29,468 | 35,041 |
Return per Income share | 6.65p | 4.08p | 10.73p | 5.94p | 31.40p | 37.34p |
All revenue and capital items in the above statement derive from continuing operations.
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
AT 31ST MARCH 2018
| 2018 | 2017 |
| £'000 | £'000 |
Fixed assets |
|
|
Investments held at fair value through profit or loss | 189,182 | 172,493 |
Current assets |
|
|
Derivative financial assets | 204 | 338 |
Debtors | 1,580 | 1,046 |
Cash and cash equivalents | 12,492 | 7,155 |
| 14,276 | 8,539 |
Current liabilities |
|
|
Creditors: amounts falling due within one year | (5,784) | (5,142) |
Derivative financial liabilities | (330) | (6) |
Net current assets | 8,162 | 3,391 |
Total assets less current liabilities | 197,344 | 175,884 |
Creditors: amounts falling due after more than one year | (18,201) | (16,530) |
Net assets | 179,143 | 159,354 |
Net asset value per Income share | 175.8p | 169.9p |
THE COMPANY
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31ST MARCH 2018
| 2018 | 2017 | ||||
| Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Gains on investments and derivatives |
|
|
|
|
|
|
held at fair value through profit or loss | - | 19,788 | 19,788 | - | 79,794 | 79,794 |
Net foreign currency losses | - | (1,153) | (1,153) | - | (51) | (51) |
Income from investments | 15,550 | - | 15,550 | 14,833 | - | 14,833 |
Interest receivable and similar income | 53 | - | 53 | 103 | - | 103 |
Gross return | 15,603 | 18,635 | 34,238 | 14,936 | 79,743 | 94,679 |
Management fee | (1,215) | (2,358) | (3,573) | (1,018) | (1,976) | (2,994) |
Other administrative expenses | (699) | - | (699) | (814) | - | (814) |
Net return on ordinary activities |
|
|
|
|
|
|
before finance costs and taxation | 13,689 | 16,277 | 29,966 | 13,104 | 77,767 | 90,871 |
Finance costs | (450) | (874) | (1,324) | (456) | (896) | (1,352) |
Net return on ordinary activities |
|
|
|
|
|
|
before taxation | 13,239 | 15,403 | 28,642 | 12,648 | 76,871 | 89,519 |
Taxation | (391) | - | (391) | (1,833) | - | (1,833) |
Net return on ordinary activities |
|
|
|
|
|
|
after taxation | 12,848 | 15,403 | 28,251 | 10,815 | 76,871 | 87,686 |
Return per share: |
|
|
|
|
|
|
Growth share | 8.56p | 15.01p | 23.57p | 6.75p | 61.08p | 67.83p |
Income share | 6.65p | 4.08p | 10.73p | 5.94p | 31.40p | 37.34p |
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31ST MARCH 2018
| Called up |
| Capital |
|
|
|
| share | Share | redemption | Capital | Revenue |
|
| capital | premium | reserve | Reserves1 | reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
At 31st March 2016 | 6,279 | 82,761 | 13,591 | 224,306 | 3,930 | 330,867 |
Repurchase and cancellation of the |
|
|
|
|
|
|
Company's own shares | (34) | - | 34 | (1,724) | - | (1,724) |
|
|
|
|
|
|
|
Share conversions during the year | - | 1,353 | 18 | (1,371) | - | - |
Adjustment on repurchase of deferred |
|
|
|
|
|
|
shares issued arising from share |
|
|
|
|
|
|
conversion | (1,221) | - | 1,221 | - | - | - |
Net return on ordinary activities | - | - | - | 76,871 | 10,815 | 87,686 |
Dividends paid in the year (note 2) | - | - | - | - | (8,874) | (8,874) |
At 31st March 2017 | 5,024 | 84,114 | 14,864 | 298,082 | 5,871 | 407,955 |
Repurchase and cancellation of the |
|
|
|
|
|
|
Company's own shares | (1) | - | 1 | (91) | - | (91) |
|
|
|
|
|
|
|
Share conversions during the year | - | 16,659 | 197 | (16,856) | - | - |
Net return on ordinary activities | - | - | - | 15,403 | 12,848 | 28,251 |
Dividends paid in the year (note 2) | - | - | - | - | (9,978) | (9,978) |
At 31st March 2018 | 5,023 | 100,773 | 15,062 | 296,538 | 8,741 | 426,137 |
1 These reserves form the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.
STATEMENT OF FINANCIAL POSITION
AT 31ST MARCH 2018
|
| 2018 |
|
|
| Growth | Income |
| 2017 |
| (unaudited) | (unaudited) | Total | Total |
| £'000 | £'000 | £'000 | £'000 |
Fixed assets |
|
|
|
|
Investments held at fair value through profit or loss | 261,864 | 189,182 | 451,046 | 435,814 |
Current assets |
|
|
|
|
Derivative financial assets | 111 | 204 | 315 | 394 |
Debtors | 760 | 1,580 | 2,340 | 1,810 |
Cash and cash equivalents | 17,586 | 12,492 | 30,078 | 25,920 |
| 18,457 | 14,276 | 32,733 | 28,124 |
Current liabilities |
|
|
|
|
Creditors: amounts falling due within one year | (7,816) | (5,784) | (13,600) | (13,421) |
Derivative financial liabilities | (93) | (330) | (423) | (18) |
Net current assets | 10,548 | 8,162 | 18,710 | 14,685 |
Total assets less current liabilities | 272,412 | 197,344 | 469,756 | 450,499 |
Creditors: amounts falling due after more than one year | (25,418) | (18,201) | (43,619) | (42,544) |
Net assets | 246,994 | 179,143 | 426,137 | 407,955 |
Capital and reserves |
|
|
|
|
Called up share capital | 2,898 | 2,125 | 5,023 | 5,024 |
Share premium | 12,675 | 88,098 | 100,773 | 84,114 |
Capital redemption reserve | 13,682 | 1,380 | 15,062 | 14,864 |
Capital reserves | 214,893 | 81,645 | 296,538 | 298,082 |
Revenue reserve | 2,846 | 5,895 | 8,741 | 5,871 |
Total shareholders' funds | 246,994 | 179,143 | 426,137 | 407,955 |
Net asset values |
|
|
|
|
Net asset value per Growth share |
|
| 338.5p | 321.9p |
Net asset value per Income share |
|
| 175.8p | 169.9p |
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31ST MARCH 2018
| 2018 | 2017 | |
| £'000 | £'000 | |
Net cash (outflow)/inflow from operations before dividends and interest | (3,959) | 222 | |
Dividends received | 13,637 | 11,612 | |
Interest received | - | 2 | |
Overseas tax recovered | 1,255 | 524 | |
Net cash inflow from operating activities | 10,933 | 12,360 | |
Purchases of investments | (273,101) | (289,356) | |
Sales of investments | 277,797 | 297,400 | |
Settlement of futures contracts | (259) | 1,014 | |
Settlement of foreign currency contracts | 456 | (384) | |
Net cash inflow from investing activities | 4,893 | 8,674 | |
Dividends paid | (9,978) | (8,874) | |
Interest paid | (1,312) | (1,327) | |
Repurchase and cancellation of the Company's own shares | (354) | (1,461) | |
Net cash outflow from financing activities | (11,644) | (11,662) | |
Increase in cash and cash equivalents | 4,182 | 9,372 | |
Cash and cash equivalents at the start of the year | 25,920 | 16,583 | |
Exchange movements | (24) | (35) | |
Cash and cash equivalents at the end of the year | 30,078 | 25,920 | |
Increase in cash and cash equivalents | 4,182 | 9,372 | |
Cash and cash equivalents consist of: |
|
| |
Cash and short term deposits | 6,219 | 5,953 | |
JPMorgan Euro Liquidity Fund | 23,859 | 19,967 | |
Total | 30,078 | 25,920 | |
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 2018
1. Accounting policies
Basis of accounting
The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in November 2014 and updated in February 2018.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 38 of the Directors' Report of the Company's Annual Report and Financial Statements form part of these financial statements.
2. Dividends
(a) Dividend paid and declared
| 2018 | 2017 |
| £'000 | £'000 |
Dividends paid |
|
|
Unclaimed Growth dividends refunded to the Company | (1) | (2) |
Growth 2017 second interim dividend of 2.00p (2016: 1.00p) per share | 1,549 | 852 |
Growth first interim dividend of 4.85p (2017: 4.85p) per share | 3,744 | 3,767 |
Income 2017 fourth quarterly dividend of 1.70p (2016: 1.45p) per share | 1,593 | 1,158 |
Income first quarterly dividend of 1.10p (2017: 1.10p) per share | 1,031 | 1,033 |
Income second quarterly dividend of 1.10p (2017: 1.10p) per share | 1,031 | 1,033 |
Income third quarterly dividend of 1.10p (2017: 1.10p) per share | 1,031 | 1,033 |
Total dividends paid in the year | 9,978 | 8,874 |
Dividends declared |
|
|
Growth second interim dividend of 2.00p (2017: 2.00p) per share | 1,544 | 1,549 |
Income fourth quarterly dividend of 2.50p (2017: 1.70p) per share | 2,344 | 1,593 |
Total dividends declared1 | 3,888 | 3,142 |
1 In accordance with the accounting policy of the Company, these dividends will be reflected in the financial statements for the year ending 31st March 2019.
All dividends paid and declared in the period have been funded from the Revenue Reserve.
(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year, as follows:
The revenue available for distribution by way of dividend for the year is £12,848,000 (2017: £10,815,000).
| 2018 | 2017 |
| £'000 | £'000 |
Growth first interim dividend of 4.85p (2017: 4.85p) per share | 3,744 | 3,767 |
Growth second interim dividend of 2.00p (2017: 2.00p) per share | 1,544 | 1,549 |
Income first quarterly dividend of 1.10p (2017: 1.10p) per share | 1,031 | 1,033 |
Income second quarterly dividend of 1.10p (2017 1.10p) per share | 1,031 | 1,033 |
Income third quarterly dividend of 1.10p (2017: 1.10p) per share | 1,031 | 1,033 |
Income fourth quarterly dividend of 2.50p (2017: 1.70p) per share | 2,344 | 1,593 |
Total | 10,725 | 10,008 |
The revenue reserve after payment of the final dividend will amount to £4,853,000 (2017: £2,729,000).
3. Return per share
| 2018 | 2017 |
| £'000 | £'000 |
Growth share |
|
|
Return per share is based on the following: |
|
|
Revenue return | 6,589 | 5,242 |
Capital return | 11,559 | 47,403 |
Total return | 18,148 | 52,645 |
Weighted average number of shares in issue | 76,996,832 | 77,612,534 |
Revenue return per share | 8.56p | 6.75p |
Capital return per share | 15.01p | 61.08p |
Total return per share | 23.57p | 67.83p |
Income share |
|
|
Return per share is based on the following: |
|
|
Revenue return | 6,259 | 5,573 |
Capital return | 3,844 | 29,468 |
Total return | 10,103 | 35,041 |
Weighted average number of shares in issue | 94,147,254 | 93,837,413 |
Revenue return per share | 6.65p | 5.94p |
Capital return per share | 4.08p | 31.40p |
Total return per share | 10.73p | 37.34p |
4. Net asset value per share
| 2018 | 2017 |
| £'000 | £'000 |
Growth share |
|
|
Ordinary shareholders' funds (£'000) | 246,994 | 248,601 |
Number of shares in issue | 72,972,275 | 77,220,608 |
Net asset value per share | 338.5p | 321.9p |
Income share |
|
|
Ordinary shareholders' funds (£'000) | 179,143 | 159,354 |
Number of shares in issue | 101,880,214 | 93,769,494 |
Net asset value per share | 175.8p | 169.9p |
5. Status of announcement
2017 Financial Information
The figures and financial information for 2017 are extracted from the published Annual Report and Accounts for the year ended 31st March 2017 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
2018 Financial Information
The figures and financial information for 2018 are extracted from the Annual Report and Accounts for the year ended 31st March 2017 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement
Annual Report and Accounts
The Annual Report and Accounts will be posted to shareholders on or around 15th June 2018 and will shortly be available on the Company's website www.jpmeuropean.co.uk or in hard copy format from the Company's Registered Office, 60 Victoria Embankment London EC4Y 0JP.
A copy of the annual report will also be shortly submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM
Up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found on the Company's website at www.jpmeuropean.co.uk
For further information:
Paul Winship,
JPMorgan Funds Limited, Secretary - 020 7742 4000
11th June 2018